Mecom, the European newspaper group run by David Montgomery, is considering selling its Norwegian newspaper business in the wake of a profit warning that sent its battered shares down 23 per cent yesterday.

The company has had approaches from three Norwegian publishers, A-Pressen, Berner Group and 1881, the directory owner, but the interest is thought to be less than the £300 million book value of the unit - below the price at which Mecom would be expected to sell.

Although Mecom had to admit that advertising revenues across its titles tumbled by 9 per cent in September, the company said in a Stock Exchange statement that it remains well within the range of its banking covenants, and would not sell any business for what it believes is a poor price.

Mecom, which is advised by NM Rothschild, declined to comment on the sale situation, but with profits in Norway doubling under its ownership, it is expected to look for a sale price well above £300 million. Norway is the group's second most profitable territory after its Dutch operations.

With trading continuing to suffer in October, Mecom said that its underlying profit would be about a tenth lower than expected, which analysts estimated would now be about £165 million. That was enough to send the shares down 1.15p to 3.7p, valuing the company at £58 million.

David Montgomery, who was ousted after running Mirror Group Newspapers for most of the 1990s, rebuilt his career by buying up a series of newspapers in Germany, Holland, Poland and Denmark, as well as Norway, raising debt from what was a sympathetic City.

However, the credit crunch is threatening Mr Montgomery's comeback. Mecom shares have fallen 95 per cent in the past year as the group has been hit by difficult trading at a time when investors have become increasingly nervous of debt-laden companies.

Mecom's debt was £571 million, at September 30, or 3.5 times underlying profits, having risen by £41 million. Debt is expected to ease to about £540 million by the end of the year as the publisher gets the cashflow benefit of renewed annual subscriptions. Unlike in the UK, many European newspapers are bought for a year in advance, and posted direct to homes, making circulations more reliable.

Growing pressure has also led to tentative offers coming in for Mecom's peripheral titles and the group said that it would look at disposals because it was “committed to reducing debt levels to a more appropriate level for the current economic environment”.

The only good news that the company has had in recent months was the end of a freesheet war in Denmark, when an independently owned title folded at the start of September. Despite that, Denmark is still the company's worst-performing territory, and advertising revenues fell 15.6 per cent in the three months to September 30.

Across the group, advertising was down 7.2 per cent in the three months to September 30, including a 9 per cent dip in September, demonstrating that difficulties in trading are increasing. About 60 per cent of the group's revenues stem from advertising, with the remainder from newspaper sales.

Mr Montgomery, who is the company's executive chairman, said: “The deterioration in global economic activity is being reflected in a recent slowdown in advertising performance and a weakening in the market outlook. We remain confident that Mecom's operating model is the right one.”

— David Montgomery is best known in Britain for his tempestuous tenure as chief executive of the Mirror Group in the 1990s.

Richard Stott, the former Daily Mirror Editor, accused Mr Montgomery of having “ethnically cleansed” the paper’s staff, saying: “It is easy to form the impression he doesn’t much take to the human race and the human race hasn’t much taken to him.”

Now 59, Mr Montgomery started out as a sub-editor on the Mirror in the 1970s. His time as chief executive of the group came to an end in 1999 after some well-publicised disagreements with Sir Victor Blank, the chairman.

When he founded Mecom in 2002, Mr Montgomery’s focus shifted to Europe. He bought up regional publishers in an unconsolidated market, cutting costs and running the businesses along UK lines.

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